The Employment Relations Authority’s (Authority) recent determination, Liu v Legend International Holdings is a helpful illustration of how neglecting formal processes and employee entitlements leaves employers and even individuals liable.
Also that – despite recent expansions of the applicability of 90-day trial periods – there are still strict requirements around when these are enforceable.
It’s an ever-relevant reminder of the importance for employers, and individuals who govern employers, to remain informed of their obligations under the Employment Relations Act 2000 (Act).
The details
Mr Liu worked as a cabinet maker for the business trading as HK Kitchen, first under Legend International Holdings Limited (Legend) and then, in March 2023, under Hongyu Holding Limited (Hongyu).
On 29 June 2024, Mr Wang – Director of Legend and Mr Liu’s manager – sent a text message to Mr Liu saying there would be no work next week and he should look for temporary work elsewhere, however work could resume when the market got better. Unfortunately, the market did not improve. In the following months, Hongyu did not pay Mr Liu nor provide him with work. Ultimately, he received his final pay in August 2024.
Unjustified dismissal
Mr Wang told the Authority he believed he did not have to give any notice of dismissal because Mr Liu’s employment with Hongyu had been for less than three months. Essentially, he claimed the dismissal was pursuant to a 90-day trial period.
This was not accepted by the Authority. For a trial provision to be valid, the Act sets out specific requirements:[1]
- The employee has not been employed by the employer before.
- The employment agreement contains a written provision stating that there is a trial period (not exceeding 90 days).
- The employer may dismiss the employee during the trial period and the employee will have limited grounds to raise a personal grievance or other proceedings.
Here, there was no evidence of a written employment agreement containing a 90-day trial period provision. Further, the Authority confirmed that Mr Liu’s employment with Legend had continued with Hongyu, so any 90-day trial period would have long ended.
Accordingly, the Authority found that Hongyu unjustifiably dismissed Mr Liu via the June text message. Since there was no 90-day trial period to abridge its employer obligations, Hongyu needed to have a substantive justification for the dismissal and follow a fair process.
Remedies
As remedies, the Authority awarded Mr Liu a total of $27,817.44 comprised of:
- four weeks’ wages in lieu of reasonable notice of termination;
- four weeks’ of wages as compensation for lost earnings (this was in light of Mr Liu did find other work in fact and – had a proper process been followed – it was likely his employment would have ended by way of redundancy;
- $15,000 as compensation for hurt, humiliation and loss of dignity; and
- interest on wage arrears.
The Authority also found there was a breach of minimum entitlements where Hongyu failed to pay Mr Liu his full holiday pay or notice period. Where this happened under Mr Wang’s responsibility, the Authority found he was a ‘person involved in a breach’, and granted leave for Mr Liu to recover wage arrears and holiday pay from Mr Wang personally if Hongyu couldn’t pay.
If you have any questions about the above, please do not hesitate to reach out to a member of our specialist employment team.
A special thanks to Evelynn Turin for her help preparing this article.
[1] Section 67A.
